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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

On Tuesday RealtyTrac released some pretty scary numbers relating
to foreclosures. According to its data, RealtyTrac said, more
than 176,000 people got foreclosure notices in May, an increase of 90 percent
since the same month one year ago and the highest figure ever recorded in their
monthly report.

The bad news made all of the network newscasts but we have always been a little
leery of this particular source because RealtyTrac basically sells information
on individual foreclosures to those interested in investing in the product.
Information to non-subscribers on their website is limited. Nothing wrong with
that; we would just like to have a little better understanding about the source
of its information.

Results of the quarterly National Delinquency Survey conducted
by the Mortgage Bankers Association (MBA) were released on Thursday
and were much less alarmist than the RealtyTrac figures. Granted it is a different
time line - RealtyTrac was talking about May activity while MBA's data was dealing
with the first quarter of 2007 - a period that ended March 31. However, MBA's
interpretation of its own data was reassuring.

First of all, the delinquency rate for mortgage loans on single family to four-family
properties at the end of the quarter was 4.84 percent of all outstanding loans.
This is a decrease of 11 basis points on a seasonally adjusted basis from the
end of the fourth quarter in 2006 and an increase of 43 basis points from one
year earlier. These are not loans in foreclosure - merely loans where the borrowers
are not up-to-date on payments but not yet for a period long enough to have
caused the loans to enter the foreclosure
process. Based on the reported universe for MBA data, we estimate that about
2,130,000 households are currently delinquent on mortgage payments.

The rate of loans actually going into foreclosure (which we assume would correspond
to RealtyTrac's "people (who) got foreclosure notices") was 0.58 percent,
up four basis points from quarter four of 2006 when seasonally adjusted, and
17 basis points higher than one year ago. Again, based on the reported MBA universe,
this would mean approximately 255,000 households receiving notice of legal action
over a three month period or about 85,000 per month.

According to Doug Duncan, MBA's Chief Economist and Senior
Vice President of Research and Business Development, the data is being driven
by circumstances in seven states. "The percentage of loans in foreclosure would
be well below the average of the last ten years were it not for Ohio, Michigan,
and Indiana, and the rate of foreclosures started nationwide would have fallen
were it not for the big jumps in California, Florida, Nevada, and Arizona."

Foreclosure starts set a record but most of the increase was due to events
in California, Florida, Nevada, and Arizona. "Without these four states,
foreclosure starts would have declined," Duncan said. In fact, 24 states
did see a decline in starts. Duncan blamed a portion of the foreclosure starts
in the four states on speculators who are walking away from properties in the
face of declining prices and interest rate resets. The chaos in Florida's homeowner
insurance market is also contributing to the problem.

Since the fourth quarter of 2006 the delinquency rate for prime loans increased
from 2.57 to 2.58 percent but the rate for subprime loans decreased substantially,
from 13.46 percent to 12.15 percent. VA loan delinquencies also declined 33
basis points.

ARM delinquencies increased from 3.39 percent to 3.69 in the first quarter
for prime loans and from 14.44 percent to 15.75 for subprime ARMs. Prime fixed-rate
loans had delinquency rate 8 basis points lower than in the previous quarter
(2.19 percent) while subprime loans increased from 10.09 percent to 10.25 percent.

New foreclosures went up 1 basis point to one-quarter of one percent for prime
loans and 43 basis points for subprime loans, from 2 percent to 2.43 percent.
VA loans increased from 0.34 percent to 0.41 percent while FHA loans decreased
three basis points to 0.9 percent.

Seriously delinquent loans, i.e. those that are 90 or more days delinquent
or have entered the foreclosure process totally 2.23 percent of outstanding
loans compared to 2.21 percent in the fourth quarter of 2006.

Compared to the first quarter of 2006, the delinquency rate for prime and subprime
loans were up 33 and 227 basis points respectively but was down 8 basis points
for FHA and 44 basis points for VA loans. New foreclosures were up 9 basis points
for prime loans and 81 basis points for subprime loans.

The MBA data covers approximately 44 million loans, about 80 percent of all
first lien residential one to four family mortgage loans in the U.S. Data was
collected from approximately 130 lenders including mortgage bankers, commercial
banks, and thrifts.

Comments

Between 4 and 5% of borrowers are delinquent facing possible foreclosure. What about the 95% of borrowers who are making their payments, and enjoying the benefits of homeownership? Many of whom would not have been able to buy their homes if not for interest omly loans, adjustable rate loans and liberal underwriting guidelines.

Roberta

on

Are our legilsators throwing the baby out with the bathwater? By proposing legislation that limits a borrowers ability to purchase new homes under these programs, I suspect they will reduce foreclosures, but they will also take away the American Dream of Homeownership from so many more! I suggest to anyone who can afford it, start buying up property, in good neighborhoods, and get ready for the rental boom!

Ben

on

What about the problem with government controlling the American public and private and public banks. How can a government tell a business and a citizen who can and cannot qualify for a loan. Qualifications should be up to the business, Right? Or is the government coming in and controlling private business now? I thought democracy is about less government control and more public control! Now, government thinks they can control private business and home ownership. Where is this coutry going?

Bobby

on

Here's the truth no one wants to talk about. Most people live paycheck to paycheck so if ANYTHING major happens in life, there's a good chance for foreclosure. Consumers, in general, don't want to take resposibilty for anything. So when something bad happens, let's find someone to blame. The goverment wants to get involved so they can "look" good. They want more disclosures. Have you been to a closing lately?! Ignorance is never an excuse!

Sandra

on

Roberta is correct in saying the 95% of people do pay their loans. The problem is the 5% that are not paying owe thousands more than their home is worth. If you look at CA people bought million $ homes at over-inflated values and will lose a million or so on each foreclosure. So the bank is going to lose hudnred of thousands, if not millions of $'s. Losing millions on 5% of the properties is going to kill them. What happens when the bank starts losing so much money that they go bankrupt?

Don Reynolds

on

I would believe that most of the forclosures in Arizona (my home state) are not home owners, but rather wanna-be investors who got caught in the hype 2 years ago. Why isn't anyone talking about the world wide aging of the baby boomers who most likely will want to retire or have a 2nd home in Arizona. I hope lending restrictions do not kill their dreams of a retirement home.

Donna Robinson

on

The wild card in all of this is foreclosures among the investor segment of the market. Investor activity helped to keep the "boom" going, and now those investor related subprime loans are escalating in interest rates, payments are increasing, and many are 80/20 piggybacks that can't cash flow in a good rental market.
I predict that Bear Sterns Hedge Fund story is just one of many to come. Watch for major secondary market problems in late 2007.

cjh

on

Everyting I have read of late is to cover for the guilty feelings that all have and to hide the facts in drivel and confusion that has been perpetrated by those who have ripped off the families of America. Who cares if someone doesnt have a retirement home? Most of those who have been ripped off were painfully aware that they had only one more chance at owning their own home. most were hard working and honest to a fault. How bout them apples?

Steve

on

At the bottom of the article, it says the data taken for the analysis was culled from "MBA data covers approximately 44 million loans, about 80 percent of all first lien residential one to four family mortgage loans in the U.S"
So does that indicate that they used no data involving homes with more than 1 lien? I would like to know the number in the US with multiple Liens on them and what the default rates are on those?

Troy

on

If people want the government out of their lives, they need to take responsibility for their actions. The government bails out (through foreclosure laws and bankruptcy) individuals who are in over their heads, when enough individuals default on a bank's loans, the government bails the banks out. Banks should not rely on gov. bailout, and make good business decisions regarding qualification of an individual for a loan. As long as there's somebody to bail you out, ones judgement is skewed.

Doug

on

Banks refuse to lower interest rates on adjustable rate loans. Because the FEDS bail out the banks when they BANKRUPT. After attempting to lower their rate and being told that they will have to pay steep pre payment penalties. Buyers give up and end up getting foreclosed on after months of frustration. Why should the bank be allowed to charge high interest rates and pre payment penalties? While at the same time most buyers would keep their homes if rates were lowered and pre pays were waived.

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